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Do classic referral programs still work?

Referral programs have been known to be one of the most popular marketing avenues that a brand can pursue. That is due in part to the fact that 82% of American consumers seek recommendations from friends and family when considering a purchase. These programs are all about incentivizing your customers to actively reach out and provide that extra bit of social proof needed to convince others to purchase your product. Having said that, incentivizing and engaging with your customers is different today than it was a decade ago which is why many brands are finding that their programs are not working quite as much as they had anticipated. This begs the question, are the days of the classic referral program over?

What’s so good about referral programs anyway?

Beyond the clear advantage of a new customer, there are plenty of benefits that referral programs can have.

When a customer refers someone else in their social circle, it also reminds them of what they like in your product. They will most likely explain the benefits of your product, the need they first had when considering different options, and how your product solved that need.  This positive reaffirmation of their purchase will make them more obliged to purchase more products from your company in the future. Furthermore, they might tie in their own success with the success of the referral, and as a result, with the success of your company. Showing appreciation to your clients following any referrals will further strengthen their bond and loyalty to your brand.

In addition, referral programs are great at exposing your brand’s social media presence. Not only is the program itself a good excuse to post and engage with your audience, but it also provides your customers with another avenue of interacting with your brand.

So where is the problem?

The classic referral programs most commonly offer a monetary incentive in exchange for a referral. These days, consumers put in this position might feel slightly compromised by this trade-off. Solely offering a cash incentive for referrals might make your customers reluctant to convince those close to them in the fear of seeming “greedy” and not genuine.

Furthermore, in order for referral programs to work, they need a more robust strategy to support engagement with customers. When companies set up a referral/incentive structure and simply push it upon their customers they are not taking full advantage of the benefits that proper customer engagement can yield and thus might have lacking results.

To refer or not to refer?

Should your company use a referral program? Well, it depends.

Whether you decide to stick with monetary incentives or diversify how you encourage your customers, it is important to have a proper strategy to support your program.

Gathering constant feedback and tailoring your outreach to your customers will help make your customers feel like part of your brand. The reason this is important is that the more involved your customers feel, the more they will attach your success to their own. That’s why simply offering a reward is not enough.

Using a specialised customer-engagement platform will go a long way in helping you encourage and create meaningful relationships with your customers. Some of these platforms, like Innercircle, will also come with built-in referral engines that help tailor unique messages to your audience and create unique referral IDs, simplifying the process of rewarding your users.

Think it through

Referral programs are not to be taken lightly. While they are lauded as a low-investment avenue of marketing, if they are not supported with a robust customer engagement strategy they will most likely fall flat. Many SMBs which might not necessarily have a large marketing budget will need to think outside the box in ways to achieve this. Most often, though, they will find that customer-engagement platforms are an efficient way of levelling the playing field.

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